CPI Inflation Close to Zero...In China

The March CPI report is likely to show that inflation remains high in the US, but is continuing to moderate. In February, the headline and core CPI inflation rates were 6.0% and 5.5% on a y/y basis.  Stock and bond prices should rally if the March numbers are lower by around 50bps. They would probably sink if the results are around 50bps higher. We are expecting the headline CPI inflation rate to fall to 3.5%-4.5% and the PCED headline inflation rate to fall to 3%-4% by the end of this year without an economy-wide recession

CPI goods inflation peaked last summer around 14.0%. It was down to 3.5% in February (chart). In other words, it has been transitory. CPI services inflation has been persistent rising to 7.6% during February.